Massive cost reductions key to Peak’s long term future

Approximately 40 staff lost their jobs at Peak Gold Mines last week as part of the mine’s new owner Aurelia Metals Ltd’s plan to cut costs to extend the life of the mine.

Aurelia’s managing director and CEO Jim Simpson told The Cobar Weekly that while redundancies are never good, in this case they had been inevitable.

“It comes after mismanagement in the past,” Mr Simpson said.

He said before the sale, New Gold had also been planning “massive reductions in costs” in an effort to extend the mine life.

“The current costs of the mine were unstainable,” Mr Simpson said.

“If we were to continue as is, Peak would only have a two year mine life.

“It’s unfortunate that some people have had to leave but the most detrimental effect would be to have the mine close in two years,” Mr Simpson said.

“This is a little bit of pain for a long term gain.”

He said some staff had welcomed the redundancies while others had been devastated.

“I think some of those people will retire, and retire gracefully.”

He expected some of the employees made redundant might find positions with Endeavor or other mining companies or move on elsewhere.

Mr Simpson said it was not the first time a local mine had made redundancies and over time he expected the town would adapt.

“Our aim is to give some sustainability for the employees that are left, and also the contractors and the local community in general.

“It needs to be cost effective, cost efficient and more productive. We need to lower the cost base.”

He said prior to Aurelia taking over, the whole mine had been overstaffed and so every department (apart from mining) experienced staff cuts.

As part of Stage 1 cost cutting measures, redundancies were made last week in the mill, human resources, safety, environment, exploration and geology areas of the mine.

Mr Simpson said while they had tried to implement the first stage of redundancies as swiftly as possible to give all departments clarity, the second stage (mining) is not expected to be finalised for another five to six weeks.

He said because they didn’t have full access to the mine prior to the sale, they hadn’t yet been able to fully ascertain the mine’s position.

“There’s a lot of work to understand ore reserves, resources and the life of mine plan which will dictate what we do with the mining department,” Mr Simpson said.

“As yet, there’s been no changes in mining, we are still reviewing it.”

The company has also not ruled out
employing contractors to take over mining positions.

“We have said to our workforce that we are considering moving to contractors.”

Mr Simpson said that decision would come down to comparisons in costs and productivity.

As a former general manager of the Peak Gold Mine, redundancies had just been made at the mine prior to when Mr Simpson commenced in 2003.

“When I got up and spoke to the staff one of the questions I got asked was, ‘When is the next set of redundancies?’.

“I told the staff that as long as we maintain our effectiveness as a team, we won’t need to make any more redundancies.

“That was my pledge,” he said.

“We effectively had the right number of people to run the business.”

During his five year tenure at Peak Gold Mines, Mr Simpson said the mine had been running with a “lean team of 250-260”.

He said under New Gold’s management the staff numbers had swelled considerably.

“We need to simplify this, it’s not a big mine,” Mr Simpson said.

He said the mine could also no longer rely on being able to extract high grade ore.

“We’ve been mining a lot of high grade for a very long time, it’s going to run out.

“We’re getting down to the lower value ores, we need to keep costs sharp to keep the mine functioning for a longer period of time.”

He said the company’s obligations were to their shareholders to ensure they would get solid returns.

“We also have a commitment to people’s employment tenure,” Mr Simpson said of the remaining workforce.

“I hope this workforce will take us forward and that we’ll be able maintain a core team that will take this mine through to the end of its life and that we’ll be able to sustain Peak Gold Mine for a period beyond two years.”

Mr Simpson said he aimed for the mine to become more involved in the community as it was in 2003.

He said even after leaving the mine in 2007, he continued his association and interest in the Cobar community.

“I maintained a connection with the community working with Enterprise Facilitation and being proactive in maintaining business in Cobar to ensure it continues to prosper.

“Aurelia is trying to do everything respectfully and professionally and down the track hopefully people will see that,” he said.